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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4414
Experience:  FCCA FCMA CGMA ACIS
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(1) are my wife and myself liable to CGT if we gift £30,000

Customer Question

(1) are my wife and myself liable to CGT if we gift £30,000 premium bonds each to our two grand daughters aged 17 and 13 years?
(2) Also we have bequeathed our total assets worth appx. £965,000 equally to our two children.Do they have to pay inheritance tax after our death? We both are pensioners gged 75 and 70 years.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

No, gifts are outside the scope of UK taxation. However, at these levels you would create a Potentially Exempt Transfer (PET) in your estates for Inheritance Tax (IT) purposes. PETs run off on a taper over 7 years and in the event of an early decease of a donor are added back to their estate and are the first to suffer IT. If the deceased estate cannot meet the IT then it cascades down immediately to the beneficiaries for payment. HMRC advise that this is a rare occurrence. The solution is, of course, a reducing term life insurance policy to protect the PET, a tad expensive at your ages and probably not cost effective!

IT is not a liability normally on beneficiaries, but is levied at a standard rate of 40% on the deceased's estate, see below. If the estate cannot meet the liability it's hard cheese for the Chancellor of the Exchequer!

IT is levied at 40% on the value of a deceased estate over 325K. There is a possibility of a tax saving if you have mirror wills bequeathing assets to your surviving spouse initially if one or other you has assets below the 325K threshold. It effectively give the pair of you 650K tax free as the surviving partner mops up any unused 325K allowance of the deceased apouae. Of course if you each are over the 325K it's a lemon in taxation terms.

I do hope I have thrown some light on your position and helped put your minds at rest over this matter.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.